VMW: Waterford Telemedicine Partners and the Waterford Telemedicine Index have been established in 1997 by Waterford Advisors, Inc., as a resource for investors and telemedicine industry participants. Can you tell something more about the methodology, used by WTP to map the commercial telemedicine scene in the United States?
P.L.: We use a combination of macro and micro analytic methods. First, we test the macroeconomic case for telemedicine. In other words, what are the social, political and technological states of nature that would allow a market for telemedicine to emerge, grow and mature? Second, we conduct fundamental analyses of firms in the industry, noting their performance vis-à-vis the aforementioned macro factors and comparable companies. Finally, we monitor and test the statistical activity of the industry through one of several indices we have developed.
It is worth noting that we do not limit our analyses to U.S. firms or the U.S. market. Indeed, the fields of telemedicine and investments are both global by nature, so we approach it accordingly. Three of our analysts focus exclusively on the international (i.e., non-North American) market for just this reason.
VMW: Do companies have to put in a request and contribute financially to figure in the Waterford Telemedicine Index or does WTP itself select the businesses, based on a criterion of economical relevance?
P.L.: We take objectivity very seriously, such that even the appearance of a conflict of interest is considered unproductive. Therefore, all publicly-traded firms included in our indices or the subject of our reports are selected by our analysts, and approved by our investment committee, on the basis of their importance to the telemedicine industry. We do not accept fees, equity or other securities, advertising revenue, or any other comparable payment from these firms.
VMW: In which ways can investors receive useful advice from WTP? Are your services customised according to individual client demands?
P.L.: Historically, our clients would retain us through our investment banking parent, Waterford Advisors, Inc. for matters pertaining to capital, strategy or corporate governance. They do so either for general, ongoing advice or for assistance with a specific assignment.
However, given the dramatic growth in telemedicine, which we expect to continue, we established a subsidiary firm, Waterford Telemedicine Partners, that prepackages investment research and industry information that is of interest to most investors. This is more economical for investors and a more efficient use of our professional assets. We of course continue to provide advice and guidance to those who request it. The content products will be made available in early 2000 (Jan. or Feb.) through the Web on a subscription basis.
VMW: Does WTP plan to also include in its analyses telemedicine-focused companies which are not headquartered in the USA?
P.L.: Yes. As mentioned above in my reply to question 1, we take the non-U.S. market very seriously. We've established a team of specialists to concentrate on the international market. Moreover, we tend to hire people who at least speak one language other than English (which is not so easy to do in the U.S.), and preferably who were born and/or lived outside the North America. This increases our sensitivity to the cultural and geopolitical issues that so greatly influence health care, commerce and finance.
VMW: WTP has segmented the telemedicine business into cohorts, relating to Network Technology Products; Telecommunication System Services; Videoconferencing Systems; Teleradiology & PACS; Diagnostic Technology & Equipment; Monitoring Devices & Services; and Health Care Information Systems. What about companies that develop surgical robots, virtual reality applications, and medical training simulators, or are these technologies still too much in their infancy to present them to the market?
P.L.: Excellent question. The examples you mentioned are too immature to be given a cohort of their own (such as robotics) and may never warrant a discreet group (such as virtual reality). But they are represented in the index by other cohorts, especially the health care information systems -- the catch-all for everything that doesn't fit somewhere else -- or in firms that are in related areas, such as network technology.
Since the market is changing so rapidly, we regularly review the cohort assignments as well as the relevance of the cohorts themselves. For simplicity we have generally defined the market into three tiers: infrastructure, facilitators and providers.
Infrastructure firms are those that provide the network technology and telecommunication carrier services necessary for telemedicine to occur. Since there are so many firms that fit that description, and few actually differentiate their health care users from any others, we view them as a given in the industry. As such, we do not devote a lot of our resources to them, though they're essential.
Facilitators are those firms that produce and sell products and/or services that allow medical providers to deliver care using telemedicine. This includes certain network technology firms (provided they have an explicit commitment to what we define as "telemedicine", as well as other software, medical device and service model firms.
Providers are those organisations that directly deliver health care through telemedicine using products and services from Facilitators. This includes hospitals, home health care agencies, nursing homes, physician practice management companies, etc.
VMW: In Europe, telemedicine applications are typically project-bound and heavily depend on the laborious search for research funding. Telemedicine is considered to be a process which takes time for validation and a change of mentality within the different health care organisations and institutions. Recently, some evidence is beginning to emerge about the cost-effectiveness of certain applications. How friendly is the current attitude of the health care sector, government, and the public in the United States towards telemedicine?
P.L.: The U.S. is perhaps a bit more enthusiastic about telemedicine, but we still have a long way to go. The two greatest impediments are certain physicians, who view telemedicine as an assault on their income, and the government, which not only relies on physicians to get elected (see first point) but also fears telemedicine could increase health care costs.
In my view, telemedicine could adversely impact those physicians (and hospitals, etc.) that are not delivering the highest quality care as efficiently as possible. And so it should. One of the great myths in the U.S. these days is that, due to "managed care", health care has become of poor quality and too expensive when, in fact, it's never been better. Granted, the system is not perfect and problems -- often horribly tragic -- do occur, but on the whole the system works very well. Ironically, where it fails is in caring for those who are most at risk -- the poor, the elderly, young children -- yet it's the "system" itself that compounds their woes.
The myth I referred to, in comparing medicine of the past with health care of today, fails to account for the following: (1) until recently there was nearly a complete absence of objective measures of quality in health care, and (2) until recently there was a complete disregard for the cost of care. In fact, until cost became an issue no one (including physicians, insurance companies, patients) asked if a given treatment was effective; we all just assumed it was.
The opportunity for telemedicine, I believe, is to simultaneously address the issues of quality care and cost effectiveness. But given those who are reluctant to change, I think we'll see the consumer pull telemedicine into the market. The proliferation of the Internet gives people access to information about health care that was previously unavailable. Furthermore, dramatic advances in information technology enable them to be "wired" to their physicians, hospitals, etc. through their personal computers and miniature devices as small as a wrist watch. Therefore, I think consumers -- at least in the U.S. -- will demonstrate the true market for telemedicine by paying for it themselves; the convenience alone is worth it.
VMW: What is your personal opinion on the efficiency and cost-effective potential of telemedicine? In which circumstances does the use of telemedicine pay off best? Are there any lessons to be learned from past experiences where the implementation of telemedicine was not such a good idea? Has telemedicine already succeeded to find its own way between blessing and curse in the United States?
P.L.: Blanket endorsements of efficiency and cost-effectiveness are unwise, of course. But the literature is full of examples demonstrating programmes that (1) improve patient outcomes, (2) reduce costs, or (3) both. In my view, the clinical efficacy case has been made. What remains to be proven is the full market potential, but this won't occur until it is already done as was the case of the Internet. To wit, when I began working with Net firms in late 1993, no one believed a market would evolve; now it's moving so fast few can catch up.
While there are examples of "failed" telemedicine projects, the causes are multifaceted but all were a bit too early to market. As for appropriateness of applications, however, it should always be determined by patients and their physicians: if both are comfortable using telemedicine for a specific purpose, then problems will be avoided.
Areas in the short run of greatest opportunity are (1) products or service models that permit the monitoring of patients, particularly those who have chronic illnesses like diabetes or heart disease, and (2) expert consultations from one physician to another (or to a lesser-trained provider).
As for the "blessing and curse" analogy, I don't view it as such. Certainly, telemedicine may appear to "create more problems" but only to those who are threatened by it. If one is truly committed to furthering the patient's best interest, then telemedicine is irrefutable. But no one lives or works in a vacuum; economic, political and other issues have an explicit or implicit influence.
VMW: Thank you very much, Mr. Leitner, for kindly sharing your viewpoints.